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Time of the essence for Germany's energy switch: Merkel

Date:08-Mar-13Country: GERMANYAuthor: Madeline Chambers

Germany's Chancellor Angela Merkel gestures during a news conference at the Visegrad Group meeting in Warsaw March 6, 2013.Photo: Peter Andrews

German Chancellor Angela Merkel warned on Thursday that time was of the essence if Germany was to shift to renewable energy and power intensive industries should expect cuts to their benefits and exemptions.

Merkel's ambitious switch to green energy from nuclear, known as the 'Energiewende,' is seen as a key domestic policy of her second term. Renewables are expected to account for 35 percent of German power in 2020 and 80 percent by 2050.

But six months before a federal election, questions remain, not least how to pay for the shift. Consumers are wary about the extent to which they will foot the bill and Merkel wants to reassure voters that she is trying to curb steep rises in power prices caused in part by subsidies for renewable energy.

Merkel, ministers, environmental and industry groups and unions discussed on Thursday the transition and expansion of the power grid to transport energy from new sources.

"There was no doubt that we want a successful Energiewende. That does not mean that all problems have been solved, but we agreed it is a process ... and that time is pressing to get the necessary tasks done," Merkel said.

"We are in the process of overhauling the grid exemption regulations."

On Wednesday, a court in Duesseldorf ruled that exemptions from charges for the power grid, which saved big industry 300 million euros ($390 million) last year, were unlawful.

The exemptions have forced consumers to pay more because 20 percent of their bills are for a transmission network charge.`

The European Commission also said on Wednesday that it would investigate exemptions for big companies on the grid charge, saying they might breach rules on state aid.

According to proposals by the economy ministry made available to Reuters, the government is considering scrapping the total exemption with the exemption in future stretching to 80-90 percent.

But Ulrich Grillo, head of the BDI German industry federation and a critic of what he called the lack of management of the Energiewende, warned against placing too great a burden on companies.

Energy-intensive companies, which wield considerable influence in export-oriented Germany, also enjoy waivers on the renewables surcharge and pay lower tax for electricity.

CARBON TRADING

Merkel also said the European Union must consider the long-term structure of its carbon Emissions Trading Scheme (ETS) and if necessary take action.

Asked for her view on the EU proposal to rescue the carbon market in the short term by withdrawing some emission permits, she said: "In our talks today it became clear that we must think about how the structures will look after 2020 for carbon emissions.

"Many (people) from the business perspective said we need investment security and the government will look at this and, if necessary, make arrangements."

The environment and economy ministries have so far been divided on the EU's proposed short-term fix, known as "backloading," and Germany has taken no official position.

It was unclear whether her comments signaled a possible openness to holding back permits, or whether she was siding with some EU states and lawmakers who have been withholding support from backloading because they favor structural reform.